Inside Experts: To amend or not to amend the FRCP?

According to a cacophony of surveys, reports and anecdotal evidence, the American litigation system is teetering on the brink of collapse, due in large part to complex electronic discovery issues. One report issued by the American College of Trial Lawyers Task Force on Discovery revealed that many lawyers believe there are serious problems in the civil justice system and that the discovery process, though not entirely broken, is “badly in need of attention.” Based on the survey of nearly 1,500 trial lawyers, the report is consistent with sentiments expressed by many concerned with the cost and complexity of today’s judicial system, particularly those expenses related to e-discovery.

This outcry from many in the legal community has caused a number of groups to consider whether the Federal Rules of Civil Procedure (FRCP) should be amended. The dialogue began in earnest a year ago at the Duke Civil Litigation Conference and picked up speed following last month’s e-discovery “mini-conference” in Dallas led by the Discovery Subcommittee appointed by the Advisory Committee on Civil Rules. The amendment topic is so hot that the Sedona Conference (WG1) spent most of its two-day annual meeting discussing the need for amendments and evaluating a range of competing proposals.

Although most lawyers acknowledge the pain many litigants are experiencing, there is little consensus that a Rule amendment can help address the problem. For example, earlier this year the Civil Rules Advisory Committee said, “The Subcommittee has reached no conclusion on whether Rule amendments would be a productive way of dealing with preservation/sanctions concerns, much less what amendment proposals would be useful.” One commonly held belief, echoed by former U.S. Magistrate Judge Ron Hedges, is that the 2006 amendments simply haven’t had enough time to take effect:

“Both attorneys and judges continue to need education on the 2006 amendments and, more particularly, they need to understand the technologies that create and store electronic information. The amendments establish a framework within which attorneys and judges make daily decisions on discovery. I have not seen any objective evidence that the framework is somehow failing and needs further amendment."

Judge Hedges also noted an amendment might not even be procedurally feasible because the Federal Rules Advisory Committee might be running afoul of the Rules Enabling Act.

“There is a distinction between ‘procedural’ and ‘substantive’ rules. The Rules Enabling Act governs the adoption of the former. Rule 502 of the Federal Rules of Evidence is an example of a substantive rule that was proposed by the Judicial Conference. However, since Rule 502 is a rule dealing with substantive privilege and waiver issues, it had to be enacted into law through an Act of Congress. I am concerned that proposals to further amend the Federal Rules of Civil Procedure may cross the line from procedural to substantive.”

Even assuming the Civil Rules Advisory Committee crosses these initial hurdles, it is unclear exactly what type of Rule changes, if any, would successfully address the underlying preservation problems. To help narrow the universe of choices, the Rules Committee drafted three proposals that would ostensibly help frame the discussion. The Category 1 approach can best be described as providing a higher degree of specificity than other approaches. For example, the Category 1 approach provides a fairly detailed explanation of the duty to preserve evidence (Rule 26.1(a)) and details possible triggers (26.1(b)), the scope of the duty to preserve (26.1(c)) and sanctions (Rule 37). In this camp, some have suggested there should be presumptive limits on the number of custodians that must be put on legal hold, such as initially only preserving electronically stored information (ESI) for 10 custodians. Category 2 proposes a more general preservation rule, while Category 3 only addresses sanctions as a tool for influencing behavior and would likely include an amendment to FRCP 37. Needless to say, each proposal has a number of pros and cons, likely near term impacts, and an unknown range of unforeseen implications. This amendment process is particularly precarious because the underlying technologies are morphing at such a rapid pace that any successful rule change would have to consider the evolving technical landscape and stay both flexible and agnostic.

The underlying basis for this groundswell of concern is that e-discovery preservation costs are spiraling out of control, according to many enterprises constantly engaged in litigation. As evidence, the Sedona Conference recently conducted a “Membership Survey on Preservation & Sanctions” and while those statistics aren’t published yet, early indications show the vast majority of members believe preservation issues are increasingly significant in civil litigation during the last five years.

The issues surrounding the preservation challenges, and presumably what any Rule amendment would try to solve, are threefold. First, the trigger of the preservation duty causes heartburn for many organizations because of the highly fact-specific nature of the duty, which typically begins when litigation is “reasonably foreseeable.” In some cases, like Phillip M. Adams & Assoc., LLC v. Dell, Inc., 2009 WL 910801 (D. Utah Mar. 30, 2009), this can mean that the preservation obligation is triggered years before an actual complaint is filed. Further complicating the trigger inquiry is the fact that in a pre-litigation landscape things are often quite amorphous, causing companies to try and discern if threats, unofficial claims and a range of semi-serious events will ever materialize into actual litigation. Finally, this entire fact-specific analysis is often viewed by a judge who inherently has the benefit of 20/20 hindsight to clearly say that the subject event did in fact mature into a significant litigation event. This is why entities like the Lawyers for Civil Justice are lobbying for a revised, brighter line trigger that is limited to situations in which there is a reasonable “certainty" of litigation, versus a mere likelihood.

Assuming a party can cross the trigger minefield unscathed, it is then tasked with attempting to determine the scope of the preservation duty. A common challenge is discerning which custodians have potentially relevant information in situations where litigation is “reasonably anticipated,” but the complaint has not yet been served. For many companies, this soothsaying exercise causes them to over-preserve since they aren’t able to narrowly define their pre-litigation preservation requirements.

With the increasingly complex palate of ESI this means an entity might need to preserve data ranging from e-mail to social media, cloud content, instant messaging, structured databases, personal devices and network shared drives even before they have been sued. Particularly for companies behind the curve with their information governance practices, a broad initiative like this can severely tax both the information technology and legal teams for months and conceivably years.

Finally, against the challenging trigger and scoping backdrop, there is the specter of spoliation sanctions, which range from moderate (witness/issue preclusion, fines, etc.) to severe (adverse spoliation inferences, default judgment, etc.). To make matters worse, there are differing levels of culpability (ranging all the way from mere negligence to gross negligence and bad faith) in both state and federal courts. In response, many geographically diverse enterprises feel the need to build overly conservative e-discovery processes on the off-chance they land in a jurisdiction that will sanction merely negligent e-discovery conduct. Given the split in culpability levels, case law has evolved in fits and starts, leaving many scratching their heads as they attempt to discern meaningful standards and best practices.

The debate about whether or not Rule amendments are necessary is far from over. In many ways we face the classic chicken and egg conundrum because without a sense that a proposed amendment would actually eliminate some of the e-discovery preservation pain, it’s hard to conclude that any change is worthwhile. In the end, litigants want more clarity and predictability when it comes to murky preservation duties. Crafting a rule that accomplishes this objective without unduly limiting the need for flexibility is a Herculean task that will continue to spark plenty of debate.